It's meant to be a freaking STAGE item, not presented as a close-up item. What, you read the description and were expecting to be able to do it in front of their faces?
"Hey Mr, I just stole your wallet!"
"...but my wallet isn't made out of sponge!"
"well, that's the BONUS part of the effect, your wallet actually changes into sponge...uh, anyways..."
As tpdmagic said, it's an item made to look like you stole the wallet, and not actually some mechanical arm can numb all sense of feel and then reach into the spectator's backpocket, remove his wallet, and then give him a wedgie or something. It's meant to be presented on a more large-scale premise, and I have seen many people use it very effectively, to great success in their shows. It's a nice no-risk alternative to normal pickpocketing where you do risk getting caught with your hand up a female spectator's pants or something ("but I swear, officer, I wasn't feeling her up, I was trying to remove her wallet! Removing her wallet is an offence as well?.......man, am I screwed..."). Of course, I would rather stick to the conventional pickpocketing but that's me.
If you do want a good resource to check into in regards to pickpocketing, especially in the context of a stage show you should check out Stealing the Show, which has some great stuff in there. All of James Coats' dvds have been crap, but I haven't seen his latest set so far, and I don't know if I would want to anytime soon. If you want to see a true master of pickpocketing you should go see Apollo Robbins do his stuff. the guy's pickpocketing is abs0lutely mind-blowing.